Biden boasts deficit-cutting, but federal deficit set to double to $2 trillion.

President Biden ‍Touts Deficit-Cutting, ‍But‌ Experts ​Warn of Unprecedented Budget Deficit

As President Joe ⁤Biden on Monday touted his apparent deficit-cutting‍ mettle, a nonpartisan fiscal policy ⁣research group warned of an “unprecedented” explosion in the federal budget deficit, which it said is ⁣on track to double to⁤ $2 trillion this​ year.

In a Labor Day speech in Philadelphia on​ Monday, President Biden⁣ touted his economic policies while ⁢taking a series of jabs at his predecessor, President Donald Trump.

“Unlike the last ⁤president, in my ‌first two‍ years … I cut the deficit $1.7 trillion,” President ⁣Biden boasted.

Unmentioned Factors​ Behind the Deficit Drop

What President ⁢Biden failed to mention, however, is‌ that⁣ most of ⁣the⁤ massive deficit‍ drop in 2022 was a ⁢one-off, driven by what ⁣experts say was a one-time inflation-related explosion in tax revenue and capital gains.

And while the ⁢president touted⁢ his supposed deficit-slashing accolades, the Committee for‍ a Responsible ​Federal ⁢Budget (CRFB), a nonpartisan organization that seeks to educate the public on issues with significant fiscal policy⁢ impact, projected that the ​deficit ​under the president’s watch would double in 2023 to around $2 trillion.

“Deficits ⁣are slated to double this year, from $1 trillion up to $2 trillion, when you exclude student debt cancellation,” CRFB senior⁤ vice president Marc Goldwein said in a ⁤post on X, the​ platform formerly known as Twitter.

“This is unprecedented given the economy,” Mr. Goldwein added, referring to the fact that it’s unusual for deficits to rise so sharply​ when⁢ the economy⁤ is doing relatively well.

Deficit‌ 122 ‌Percent Higher⁣ so Far in 2023

After record government spending in ⁣2020‍ and 2021 in‍ part to offset the negative economic impact of ‍the COVID-19 pandemic, the federal budget deficit dropped by a record amount in 2022 from near $3 trillion to around ​$1 trillion.

The Congressional Budget Office (CBO) said in March 2023 that the government took in $4.9 ⁣trillion in 2022, with more than half ⁢coming from receipts from individual income⁣ taxes, which were the highest on record as a percentage of gross domestic ⁤product.

In February, the CBO ‍projected that the budget deficit for 2023 would rise to around $1.4 ​trillion, while projecting ​that, in coming ⁣years, deficits would ‌gradually rise each year, hitting $2.7‌ trillion ‍in 2033.

But the CRFB’s latest estimate shows that the pace of deficit spending under President Biden’s watch is rising⁣ faster​ than CBO’s February projections and will hit $2 trillion this year.

In a post on X, Mr. Goldwein⁤ explained that the⁢ 2022 deficit decline ‍could be attributed‌ to ​a one-time ‌revenue⁣ surge (“which is over”) as the economy bounced back from the pandemic,⁢ rather than due to ​factors that can be attributed to “Bidenomics.”

He⁣ added that what’s driving the CRFB’s projections for a doubling ⁣of the budget deficit is a combination of a rise ⁣in spending due to soaring interest rates, higher Social‌ Security and Medicare costs, a lack of Federal ‌Reserve remittances to the⁤ U.S. Treasury, and a “big” budget deal.

In March,‍ the CRFB warned that President Biden’s proposed budget for the⁢ 2024 fiscal year would send‍ the national debt to a record high within four years.

“Debt⁢ under the President’s budget would grow to a new record as a⁢ share of the economy over the next decade,” the CRFB wrote in the⁤ March 9 analysis.

“It is disappointing that⁤ the President continues⁢ to propose trillions of​ dollars in new spending ⁢and tax breaks without a plan to‍ put our debt ‌on a sustainable path,” the organization added.

Separately, Treasury Department data shows ⁣the ⁤year-to-date deficit as of July stood at about $1.61 trillion, the⁣ highest amount ever outside of the pandemic.

“Compared to the ​national deficit of $726 ⁢billion for the same period last year (Oct 2021—Jul​ 2022), our‌ national deficit has increased by‌ $887 billion,” Treasury said in a statement, ⁢noting that the deficit was⁤ 122 percent higher ​so far this year compared to the​ same period last year.

Overall, the national debt has increased by roughly $5 trillion since ​President Biden assumed office, from roughly⁢ $27.8 ⁤trillion ‍to ‌around $32.8 trillion.

Deficit ‘Doom Loop’?

As​ the‌ U.S.⁤ central bank has raised its benchmark Fed ‍Funds rate⁣ rapidly in a feverish bid to⁤ quash soaring inflation, interest payments on government debt have climbed, prompting warnings from ​prominent‍ economists.

Former Treasury Secretary Larry Summers said‍ in a Bloomberg interview at ⁤the end of last year ⁣that fiscal debates need to be put “back on ‍the table” as ‌surging borrowing co